Do some search in the financial news and look for some of the recent IPO offerin
ID: 2441228 • Letter: D
Question
Do some search in the financial news and look for some of the recent IPO offerings. Choose one of the upcoming IPOs you find most interesting. Write a short summary of the company and the conditions of the IPO. Share any information you believe is relevant to determining whether investing in this IPO is good or bad and whether the company seems to be making the right decision by offering the IPO with the offered price. Using what you learned so far explain if you find purchasing this IPO beneficial.
Explanation / Answer
Chosen Company: Sonos Inc.
IPO Date: 08/03/2018 (3rd August)
Company Snapshot: Sonos Inc, a private parent, is engaged in the manufacturing of high end speakers, multi-room audio products, and video products for home entertainment, along with music distribution apparatus. Being headquartered at California, it was founded in 2002 and was renamed from Rincon Audio Inc. to Sonos Inc. in 2004.
Conditions of IPO:
The proposed symbol for this company: SONO
The company will be listed in NASDAQ
Price per Share : In between $17 and $19
Number of shares Offered: 13.9 Million
Total amount to be offered: $303.4 Million
Number of days of Lockup: 180 days
Company’s decision for an IPO:
Sonos has a very strong distributor base, with Best Buy Company Inc. distributing almost 45% of their products. Other than this, it also has good relation with several other distributors across Europe and USA
Sonos has a good set of loyal customers, who repeats purchases and thereby has helped them to quote high price for their products
Opinion on buying the share: From the research done, it is advisable not to go for this share in the IPO. This is because:
Although Sonos has registered growth in its revenue, but the company has been into loss continuously. The company has also witnessed deterioration in its Gross profit margin in the last six months till March 2018, with its profitability reducing to 42.3%from 44.3% during the same time in 2017.
One of the major problems that it might face in near term is the discontinuation of the agreement with Amazon. Sonos has to depend on Amazon and other companies for the key voice recognition technology for smart speakers, which are in high demand. It has already released Alexa enabled Sonos One in the market and another product Sonos Beam is on its way. There is a high probability that Amazon might call off this integration on a limited notice, which could hamper the above two products’ sales, thereby hampering operating results. Moreover, since Sonos is primarily a hardware company and its sales depend on speakers, Amazon or other partners might subsidize the prices and tend to offer additional services other than speakers.
Sonos depends only on one Taiwan based manufacturer, Inventec, which is quite risky.
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